Small firms getting key advice from 'shadow' directors
When times get tough, most people want help. Owners of small companies are no exception.Skip to next paragraph
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So with modest-size firms facing tough economic times, a growing number of small business owners are turning to outside advisers for help in planning long-term strategy and in tightening up day-to-day operations. Some small business owners are hiring individual advisers, while others are setting up panels of experts.
''More and more managers and owners of smaller companies are realizing they don't have the resources in house and must look outside,'' says Albert Pastino, a Deloitte, Haskins & Sells partner. Mr. Pastino runs the accounting firm's small business practice in New York City.
One way for a firm to get useful advice is to form a ''quasi'' board of directors. A quasi board is typically composed of four or five business experts who agree to meet periodically and advise the owner of a small business in return for a relatively modest fee.
''A number of companies have adopted (the quasi board concept),'' says Harold Fox, a business professor at Ball State University in Muncie, Ind. ''I am surprised how many companies do have it.'' Professor Fox notes, however, there are no precise statistics on the number of privately owned companies that have formed quasi boards.
Members of such boards do not have the formal legal responsibilities held by board members of publicly owned companies. And members of quasi boards cannot replace the company's chief executive, as members of formal boards can.
Still, executives who have formed such boards seem pleased with the results. Preparing periodic reports on the business for the board ''is an awful lot of work, but the results outweigh the trouble,'' says Richard Yohe, chief executive officer of Maco Coatings Inc., a Wheeling, Ill., industrial roofing company.
The forming of a five-member quasi board three years ago has ''tightened up our planning and organizational structure,'' Mr. Yohe says. The chief executive has also turned to board members for help in hiring a key new executive and in coping with personnel problems.
Yohe sought board members with experience in a variety of fields including planning, finance, marketing, manufacturing, and law. ''I designed the board so that the people would fit my needs and reinforce my weaknesses,'' he says.
Nevertheless, he says he made clear to board members at the outset that ''you will have no authority. You cannot fire me. But I promise you I will do what you say or give you a good reason why not.'' Yohe contends that unless board members feel they have an impact, they will quit.
One reason the quasi board is still relatively rare is that many small business executives are not willing to have anyone -- even a group of experienced but powerless advisers - look over their shoulders on a continuing basis.
''Most small business owners are a bit paranoid,'' says Steven Brandt, a professor at the Stanford University Graduate School of Business. ''They are not terribly receptive to other folks' opinions and guidance. The last thing they want is someone hanging around their neck.''